Martin Wheatley, managing director at the Financial Services Authority (FSA), said that sales of all financial products, not just investment-related sales, should be commission free except in certain restricted circumstances.

He said "poorly designed incentive schemes" often result in customers being sold products they do not need or cannot use, while boosting the earnings of the sales person.

“Why is it that every time I walk into the bank to do something simple, like pay my credit card bill, the person behind the counter asks me if I would like to extend my credit, take out more insurance or look at their competitive mortgage rates?

“When did this happen? Banks for me used to be a service – a place where you would go in, stand in a queue, have a pleasant chat with the clerk and go about your daily business. Some time ago, this changed – financial institutions have changed their view of consumers from someone to serve to someone to sell to.”

UK banks have been hit by a series of scandals for more than 20 years over sales of unsuitable products, ranging from home loans to pensions, to customers who often did not need them. Compensation for mis-sold loan insurance alone will cost the banks £9bn.

Reward schemes will have to be changed but there must also be a fundamental shift in culture at the top of banks to make such reforms work, Mr Wheatley said.

The FSA has already shown its teeth in changing culture at the banks. Chairman Adair Turner helped to force the resignation of Barclays chief executive Bob Diamond in July, saying he was not the right person to bring about a cultural change after the bank admitted rigging a global interest rate.

Mr Wheatley's review of rewards for sales staff is part of a wider push to make banks, insurers and investment firms sell products to people on the basis of their suitability, and not how much profit they bring in.

The FSA will be scrapped next year and replaced with a Financial Conduct Authority, headed by Mr Wheatley, with a remit to protect customers. It will have powers to ban products and intervene earlier in their design to avoid people being ripped off.